Kate Taylor describes how best to demonstrate the challenging competency of local tax to APC assessors
Local tax is a tricky competency incorporating aspects of valuation as well as landlord and tenant. The fundamental principles come from statute and a complex body of case law; these underpin rental valuations on a statutory basis, using a historic valuation date, with complex regulations affecting liability and billing.
As described by Godfrey J in the Hong Kong Court of Appeal, the hypothetical world of rating is “cloud cuckoo land” (China Light & Power Co Ltd v Commissioner of Rating and Valuation [1995] 2 HKC 42).
Local tax also has a political context; it is extremely significant to the public purse as well as individual businesses’ property costs. Rarely does a budget pass without the chancellor tinkering with the uniform business rate, reliefs, or distribution. The first top tip is to keep up to date with political news.
The current political hot potato is business rates retention, with increased levels of business rates revenue being retained by billing authorities as part of the overall devolution trend. This means increasing involvement from billing authorities in the appeals process.
2017 brings a revaluation, with each billing authority working to a new rating list with an antecedent valuation date of 1 April 2015. This should enliven the appeals process somewhat, as rental evidence is re-examined and there are new opportunities for occupiers and their agents to appeal the compiled list figure.
Candidates declaring this competency to level 3 will be expected to be expert in – and confident in applying – the primary and secondary legislation.
Level 1 – the law
Don’t underestimate the importance of the underpinning law and its evolution. Local tax law has been around in some form since the Poor Relief Act 1601.
The Local Government Finance Act 1988 contains key points in schedule 6 for basis of value and mentioned matters (such as material day) and schedule 5 for exemptions. Schedule 6 is particularly important as the basis of value is not the same as market rent and the definition of rateable value must be clearly articulated.
The four tests of rateability which emanate from the father of rating cases, John Laing & Son v Kingswood Assessment Committee and others [1948] EGD 226, are principles which can be applied logically to every appeal. This process can demonstrate understanding of the concepts not defined clearly in the law – actual, beneficial, exclusive and (not too) transient occupation.
The secondary regulations surrounding transitional adjustments, plant and machinery and altering the list represent the nitty gritty and should be studied in detail. For all aspects of local taxation study, the text book Rating Valuation Principles into Practice by Peter Brown and Patrick Bond is recommended.
RICS documents to study include the guidance note Rating Appeals and the mandatory code of practice, Rating Consultancy Code of Practice, which is mainly about terms of engagement.
There is also the mandatory practice statement, Surveyors Acting As Expert Witnesses (and a companion volume for advocates) for anyone lucky, or unlucky, enough to go to a valuation tribunal.
UKGN6 (Red Book) – The Analysis of Commercial Lease Transactions is also a must-read to explain and justify the rental valuation analysis.
It should not be forgotten that local taxation can also include council tax, so an overview should be gained of the basis of valuation and relevant dates.
Level 2 – experience
Level 2 requires specific examples as evidence of experience. In a rating context this usually means appeal casework.
Candidates should make sure they understand the dates for rates applicable to the example of experience. That means the antecedent valuation date (“AVD”), material day and effective date. Identifying the correct date is a good way to show knowledge of primary and secondary legislation in practice.
Each date has a different function in the appeal as the valuation will be a “game of two halves” – the levels of value at AVD and the physical state of the property and locality at the material day. The effective date is not part of the valuation but is used in billing to determine when liability starts, stops or changes.
Rating may be cloud cuckoo land, but the rental comparables will be in the real world, so adjustment, analysis and weighting will be needed to demonstrate understanding of both the market and the hypothetical basis of rating. For weighting evidence, following the six propositions in Lotus and Delta Ltd v Culverwell (VO) and Leicester City Council [1976] 239 EG 287 is always a good bet.
At this late stage of the list, the tone of the list (generally established levels of value via settlements) is likely to be central to the defence and candidates need to understand the concept and the associated case law in prosecuting or defending the appeal.
Level 3 – advice to client
The level 3 examples of competence will need to go beyond the everyday bulk class rental valuations and stray into more complex territory that utilises case law in the reasoning, or alternative methods of valuation, such as profits or contractors. A contractor’s valuation of a small hereditament, such as a public toilet, is a simple yet effective way to demonstrate breadth in rating valuation .
A good example can be defending/prosecuting the case at valuation tribunal as expert witness or advocate – and avoiding the conflict between them as required in the RICS practice statements.
Questions of uneconomic disrepair in advice to client can be a good example at level 3, reflecting the recent topical case law of SJ & J Monk (a firm) v Newbigin (VO) [2015] EWCA Civ 78; [2015] EGLR 28.
Unit of assessment is also a hot topic, reflecting the recent decision in Woolway (VO) v Mazars LLP [2015] UKSC 53; [2015] EGLR 56, as well as an old favourite in Gilbert (VO) v S Hickinbottom & Sons Ltd [1956] 2 QB 40 (the bakery case). Unit of assessment is fundamental and involves complex reasoning.
There can be crossover with the property management competency where advice to client concerns empty property rate mitigation; make sure you know the law.
In the context of level 3, advice to client in local tax, “client” means any stakeholder and that can include the valuation officer, billing authority or valuation tribunal as well as your actual client.
Remember that the specialist assessor for a candidate declaring local tax to level 3 may well be a valuation officer who lives and breathes rating.
HOT TOPICS
- Business rates retention by billing authorities
- Woolway (VO) v Mazars LLP [2015] UKSC 53; [2015] EGLR 56
- The 2017 revaluation
EXAMPLE QUESTIONS*
Level 1
- What is the definition of rateable value?
- What does material day mean?
(The likely questions at levels 2 and 3 will depend on the examples you provide.)
Level 2
- Talk through the weighting of your rental analysis.
- What were the relevant dates for this appeal and what was happening on those dates?
Level 3
- Describe your reasoned advice to the client regarding the agreed rateable value and why you should agree to it.
*Don’t assume that the questions given here will be asked at an APC assessment. Assessors will focus on and pose questions on the basis of the candidate’s declared competencies, pathway guide requirements, up to date developed knowledge base and the examples provided in their summary of experience, etc.
USEFUL RESOURCES
Supervisor and counsellor APC training/recordings – formal CPD Managing candidates and feel a little out of your depth? Get some tips on how to manage and support your candidates. Free 1-2 hours of formal CPD: www.delever.com
APC Commercial Property Revision Guide A reference book for forward-thinking candidates’ APC preparation: www.delever.co.uk/katetaylor
APC Explained Masterclass This helps candidates to understand what needs to be done to achieve the APC, including a walk-through of the DeLever APC process timeline and myAPC Diary with an explanation of what to do at each milestone: www.delever.com
Timeline wallchart An A2 pictorial view of the APC process, based on the RICS guides and Jon Lever’s professional experience of the APC. It can be used to track progress. Free copies are available at: www.delever.com
RICS APC Guides These should be read at least once every three to four months and fully understood. Candidates from outside the UK also need to check their regional websites for any local APC requirements: www.rics.org
isurv: www.isurv.com
SUPERVISORS AND COUNCILLORS
How to help
Encourage candidates to take a step back from the appeal and talk about the underpinning legal principles and dates.
Give candidates enough responsibility to get to level 3. Consider giving them the opportunity to appear as an expert witness at a valuation tribunal.
Ensure your candidates understand the appeal from both the perspective of appellant and valuation officer. Business awareness will be important.
Kate Taylor FRICS is an APC chair and a DeLever APC coach. Follow Kate Taylor and Jon Lever on Twitter: @katetay73593006 and @deleverapc
